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|The plan of Quynh Lap 1 thermal power plant|
MoIT has recently proposed the prime minister to assign Geleximco-HUI, a joint venture between Geleximco and Hong Kong United Co., Ltd. to develop Quynh Lap 1 plant, replacing the existing investor, state-run Vietnam National Coal and Mineral Industries Holding Corporation Limited (Vinacomin).
The proposal was submitted as MoIT was worried about Vinacomin’s capacity to arrange investment capital. According to statistics from MoIT, as of September 2017, Vinacomin was bearing debts of VND78 trillion ($3.4 billion), with a debt-to-equity (D/E) ratio of 2.5.
|Geleximco stated that 80 per cent of the investment capital comes from loans from Chinese banks, while equity is just 20 per cent.|
In case Vinacomin develops the project, it will have to take up a loan of VND39 trillion ($1.7 billion). In three years, its total debts would reach VND100 trillion ($4.36 billion) and its D/E ratio will exceed the permitted level.
Along with the lack of financial capacity, Vinacomin also delayed negotiations with South Korean partners to arrange capital for the project. Until now, Vinacomin still has not been able to submit its report to MoIT about the final results of its work with two investors, Kospo and Samtan, on arranging capital for the project.
MoIT is concerned that if the negotiations between Vinacomin and the two South Korean partners fail, the fate of Quynh Lap 1 would be uncertain. As a result, MoIT worries that this will delay the implementation and the launch of the project by 2022-2023, as set out by the supplemented Power Development Master Plan VII, affecting the efficiency of the investment.
However, MoIT expressed concerns about the loans that the Geleximco-HUI joint venture will take up in case it is approved to develop the plant. MoIT is concerned that with 80 per cent of the investment capital coming from loans from Chinese banks, the project will become 100 per cent private-owned, thus, it will be difficult for authorities to ask investors to increase the localisation rate for the plant’s machinery and equipment.
In July 2017, Geleximco expressed interested in co-operating with Sunshine Kaidi New Energy Group Co., Ltd. to invest in five thermal power projects, including Quynh Lap I, II, Quang Trach I, II, and Haiphong III under the public-private partnership (PPP) model.
Three months later, in October 2017, Geleximco sent documents to the government and authorities to propose establishing the Geleximco-HUI joint venture (HUI is a subsidiary of Kaidi), to implement the $2 billion thermal power plants Quynh Lap 1 and Quang Trach 2 developed by Vinacomin and EVN, respectively.
However, Geleximco’s proposal was refused by the investors who were worried about potential delays in construction and rising investment capital in case Geleximco partners up with Chinese contractors.